Buy a Truck or SUV, Get a Tax Break...Section 179

If you own a business, you should know the tax rules for buying a SUV or a truck. You can and should deduct the operating expense of your vehicle if you use it for your business. As a small business owner myself, this article will highlight the latest automobile tax deduction rules for 2021 and beyond. 

Section 179 of the tax code is a specific accounting practice that gives small- and medium-sized companies a tax break on certain auto purchases and leases. Small businesses owners we work with  tend to purchase outright or finance and large businesses tend to lease. The idea is that a large businesses who use a lot of vehicles don’t want to bother with inventory management if they are not a car business.

What is Section 179 Deduction for Vehicles?

The Section 179 of the IRS tax code allows businesses to deduct the full purchase costs of any qualifying vehicles that are bought or financed during the tax year. In other words, if you buy or lease a car for your business, you may qualify to subtract the expense from your income.

The Section 179 Benefit

Usually, any tax method made toward the lease and purchase of capital equipment aims to depreciate the cost over several years, since the company wins back part of the cost through annual tax deductions. Section 179 is a special rule for small-to-medium-sized businesses to subtract the cost in the year of purchase or lease-start. This prompt write-off under Section 179, as much as $25,000, may surpass the amount of your payments for the first year, which results in the purchase or lease of an eligible vehicle much more reasonable and affordable. 

If you plan to use the vehicle partially for personal purposes, it must be used at least 50% for business. However, if it is for partial personal use, you can only deduct the percentage used for business. Multiply the purchase price by the percent of business use (51% to 100%). 

What Vehicles Are Eligible for Section 179 Deduction?

For a vehicle to qualify for Section 179 tax treatment, it must be a crossover or SUV that isn’t ordinarily used for daily personal transportation. Eligibility also requires the vehicle to have a gross vehicle weight rating (GVWR) between 6,000 and 14,000 pounds. 

A List Of Vehicles That Have A Gross Weight (GW) Of Over 6,000 LBS

Here’s a list of 2021 model cars with a gross weight over 6,000 lbs. Usually each vehicle will have its weight on the side door. If you’re unsure, just ask the dealer. These vehicles should qualify for the automobile tax deduction rule. But of course, double check.

List of Heavy Trucks and SUVs That Qualify

Audi

·       Audi Q7, SQ7

·       Audi Q8, SQ8

BMW

·       BMW X5 M

·       BMW X5 XDrive35I

·       BMW X6 M

·       BMW X6 XDrive35I

·       BMW X7 (all models)

Bentley

·       Bentley Bentayga

Buick

·       Buick Enclave 2WD

·       Buick Enclave 4WD

Cadillac

·       Cadillac Escalade 2WD

·       Cadillac Escalade AWD

·       Cadillac XT5

·       Cadillac XT6

Chevrolet

·       Colorado 2.8L AWD

·       Silverado C1500

·       Silverado C2500

·       Silverado C3500

·       Silverado K1500

·       Silverado K2500

·       Silverado K3500

·       Suburban C1500

·       Suburban K1500

·       Blazer

·       Tahoe 2WD LS

·       Tahoe 4WD LS

·       Tahoe Hybrid

·       Traverse 2WD

·       Traverse 4WD

Chrysler

·       Chrysler Pacifica

·       Chrysler Pacifica Hybrid

Dodge

·       Dodge Durango 2WD

·       Dodge Durango 4WD

·       Dodge Grand Caravan

Ford

·       Ford Expedition 2WD

·       Ford Expedition 4WD

·       Ford Explorer 2WD

·       Ford Explorer 4WD

·       Ford F-150 and larger 2WD

·       Ford F-150 and larger 4WD

·       Ford Flex AWD

GMC

·       GMC Acadia 2WD

·       GMC Acadia 4WD

·       GMC Sierra C1500

·       GMC Sierra C2500 HD

·       GMC Sierra C3500 HD

·       GMC Sierra C3500 HD

·       GMC Sierra K1500

·       GMC Sierra K2500 HD

·       GMC Sierra K3500 HD

·       GMC Yukon 2WD

·       GMC Yukon 4WD

·       GMC Yukon Hybrid

·       GMC Yukon XL C1500

·       GMC Yukon XL K1500

Honda

·       Pilot 4WD

·       Honda Odyssey

·       Honda Ridgline AWD

Infiniti

·       Infiniti QX80

·       Infiniti QX56

Jeep

·       Jeep Grand Cherokee

·       Jeep Gladiator Rubicon

Land Rover

·       Range Rover 4WD

·       Range Rover SPT

·       Discovery

·       Defender

Lexus

·       Lexus GX460

·       Lexus LX570

Lincoln

·       Lincoln MKT AWD

·       Lincoln Navigator

·       Lincoln Aviator

Mercedes Benz

·       Mercedes-Benz G550

·       Mercedes-Benz GLS

·       Mercedes-Benz GLE

·       Mercedes-Benz Metris & Sprinter

Nissan

·       Nissan Armada 2WD

·       Nissan Armada 4WD

·       Nissan NV 1500 S V6

·       Nissan NVP 3500 S V6

·       Nissan Titan 2WD S

Porsche

·       Porsche Cayenne

Ram

·       Ram Promaster 1500-3500

·       Ram 1500 and up

Subaru

·       Subaru Ascent

Tesla

·       Tesla Model X

Toyota

·       Toyota 4Runner 2WD LTD

·       Toyota 4Runner 4WD LTD

·       Toyota Landcruiser

·       Toyota Sequoia 2WD LTD

·       Toyota Sequoia 4WD LTD

·       Toyota Tundra 2WD

·       Toyota Tundra 4WD

Of course, there are new vehicles with new modifications all the time. 

Please double check with your car sales person to make sure the vehicle you are buying is over 6,000 lbs!

Major Benefit of Section 179

As we know, the major drivers in a business is cash flow, taxes, and scalability. By applying the Section 179 deduction you are managing cash flow and leverage a non-tax capital lease to minimize out-of-pocket cash, and still take the full Section 179 Deduction. 

Ultimately, this is a savvy way for business owners to get the same tax benefits of a loan while enhancing cash flow by minimizing their payment. 

It’s important to note the IRS screens small businesses based on expense and tax ratios for auditing.

If your business only brings in $30,000 gross revenue a year, then buying a $75,000 SUV amortized over four years is probably going to raise red flags. But if you have a $500,000 gross revenue a year business, then writing off $10,000 – $45,000 a year in expenses doesn’t seem out of line.

The information in this article is of a general nature and should not be acted upon without further details and/or professional assistance.

Busayo Ogunsanya, CPA MST

Managing Partner

www.bigappleaccountingcpa.com

Phone:(646) 572-8621

Cell:201-925-1679

Schedule Time Here: https://go.oncehub.com/BigAppleCPACFO